Ray Wang - Price Action Market Traps: 7 Trap Strategies Market Psychology Minimal Risk & Maximum Profit

Market is a battlefield. This war zone is filled with traders from all different kinds of background. But no matter who you are, whether you are a buyer or seller, the moment market fills your order, you are in this war for one reason only: profit. Although we may not meet our opponent, the cold hard math is: your lost is somebodys gain.

The competition is fierce between major trading firms, Wall Street elites, investors, hedge fund managers and the public. Yes, the enormous yet poor, powerless and hopeful mass, built by individuals who wish to trade their ways to success. Well, sorry to burst that bubble. Majority of public traders fail and dont even last over a year. Most quit after tremendous financial loss, blaming bad luck or randomness of the market. They acclaim trading is extremely difficult and individual trader cant profit. Well, trading is like everything else, the skill to trade successfully develops over time. First, you need to learn the basic knowledge of the market and price movement. Then devoting yourself into thousands of hours of practicing. Lastly, developing a positive attitude of emotion-free and consistency. These steps are the essential journey of becoming a successful trader.

Wall Street and major firms thrive on publics generous contribution. Imagine how bloody difficult trading would be, if it only permits trading elites to make money from each other, on the battle of wits, without the publics participation. They would shake their head: No thanks. We like the public, because they almost always bring a knife to a gun fight! The conventional knowledge which public traders possess are essential to themselves because they link what they learned to explain whats happening on the chart.

Many trading books, in essence, are books of tools. Tools mostly consist of indicators, patterns, strategies, images, entry signal and rules. These tools are promoted as practical and magical, which led people to believe there is a Holy Grail to exploit. Traders couldnt wait to finish the book to experiment the strategy to make money. They became slaves of these methods and strategies, which paralyzed their analyzing ability. Rarely do they ask themselves why market is doing what its doing. The whole analyzing process and exploring the psychological truth behind a certain price action is ignored and forgotten. To them, its much easier to just follow the Guru. Objectively analyzing requires too much brain power, and its exhausting. Therefore, when something didnt go as planned or predicted, they panic and lose their minds. Not knowing the psychological truth behind certain price action plays a significant role in clouding traders judgment.

For example, Japanese candlestick fanatics use the term Marubozu to indicate a trend bar with no tails, body only. It represents strong strength and urgency, a great signal to exploit. The impatient traders will enter while the bar is forming by placing buy orders 1 tick above the green Marubozu. Because its a very strong bar, which has led them to believe price will continue to go up in the near future, thats what they have learned in Japanese Candlestick book. This kind of Confident Happy Its a gift from the trading God! Imminent Profit mentality has cloud their judgments for analyze the chart objectively. What happens next? The price goes up 1 tick to trigger them all in, then formed an equal-sized red bearish trend bar. They start to panic and some will run for cover. When price keeps on going lower, eventually triggers all of their stop-losses below that green Marubozu, the remaining traders closed the trade with a big loss. Why? Because people believe what they see and act on what they learned without the thinking process.

They neglect to consider the CONTEXT! Wall Street elites play these tricks all the time in order to get their orders filled. Major trading firms holds considerable amount of money to affect the price movement. Remember that! They have the Edge which the individual trader like you and me do not possess. They have the funds to push price up into a huge bull bar and counter it right after. To trap the traders who dont know better. Its crucial that beginners have to recognize these traps in order to keep their trading account intact. These traps can be found in almost all charts. I will illustrate chart examples along with case study in Part II if this book.